Why do traders fail?

[hongwong]

WayneL, I dont doubt this. I am not here to say tech vs fund. Personally if it make money and the style suits u. I would say go for it.
READ this:
This is my outlook on the stock and I am telling you to buy/sell/hold.
I just want to give a fundamental outlook on the stock from my angle!


https://www.aussiestockforums.com/forums/archive/index.php/t-2694.html

Taken from the above:
It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. Your mind will do everything it can to keep you in a bad trade and get you out of a good trade. Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will never go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a trading perspective, holding these beyond reasonable risk will take you out of the game.

Here is what Nick has said.

I am going to take a look at MGW.
This is from what I can see.

MGW
The company is trading at P/E 70.26 now(BAD)
Revenues has been going up - good point
The EPS is good until 04/05. – investigate, could be once off cost or something.
Worrying factor:
This company has started to get into debt since 02
Inventory level has risen from 2003, therefore this shows signs that demand has stop and receivable is dropping. Too much stock in warehouse and a right off could be coming.

For me I would have pulled out from 2003/04
Because of the debt level, increase in stock and slow down in receivables.

To confirm all this I would ring up a store like “Dan Murphy” and ask them
How sale are going for MGW or what wines/beers they sell.

This is what I have seen in the books.
All information has been taken from commsec.

I can take a look at PPX, PBG, IIN, WYL, PBB if people are really that interested, but u can all do this for yourselves.
Just need to ask Nick or anyone, what he saw in the charts etc during etc and what made him sell out ?

edit
This was a very quick over view of the stock and looking over the books.

Hey Guys Sorry to quote myself.

I stress I am not trying to prove Fund vs Tech, as I believe we are all in the same game.

I have just given a view point fomr a Fund, and would like to understand what a Tech see in the chart ?

I am hoping to get a better understand of the Tech way.

FYI. I gave a call to dan murphy, They have said it not selling at all, and there is an over supply of wine in their stores.

 

[Punter]

Traders maybe fail due to overexposing them to things/letting emotion getting in the way. Thats where I've made my losses and they can often be a bit too big.

But I must say there is no perfect way to trade the markets. Each human being is different and operates from their own unique personality.

I am not much of a trader meself..I am a gambler lol

 

[Slothhead]

This topic appears to be a little convoluted.

One thing that must be understood here, trading is not about analysing a STOCK. You aren’t looking at company XYZ and wondering what will happen with XYZ.

You are analysing the people that are investing/ trading the stock.

Perfect example here is ex-dividend days.

If you are buying that stock through fundamentals you are saying that the company if worth X dollars per share. But as we all know, x-div day comes and the share price drops, this doesn’t mean that now the company is worth less.

This is simply a sign of the people trading the share.

So basically what I am saying is trading is not taking a look at a company, you are looking at the “feeling” of the people and trading upon that.

This is where the fundamental (pardon the pun) difference lies

 

[Slothhead]

Having said that though.

Each individual stock wil have its own personality, and therefore each stock "should" be traded slightly different to another.

Thats what i have found anyway.

 

[nomore4s]

Hey Guys Sorry to quote myself.

I stress I am not trying to prove Fund vs Tech, as I believe we are all in the same game.

I have just given a view point fomr a Fund, and would like to understand what a Tech see in the chart ?

I am hoping to get a better understand of the Tech way.

FYI. I gave a call to dan murphy, They have said it not selling at all, and there is an over supply of wine in their stores.

To follow on from Slothheads reply, I think you are trying to look at tech trading as a fundie. What most tech traders are looking for in a chart is a pattern that is going to give them a buy signal. When that buy signal is hit they enter the stock with a stop loss in place to limit thier losses and protect capital. The exit strategy(after profit) is much the same, when whatever exit signal they use is hit they exit the stock.
What confuses a lot of fundies about tech trading is they think it's about analysing a chart and saying whether it's going to go up or down but it's not, all a tech is looking for is a pattern which will give a buy signal which puts the odds slightly in his/her favour. Hell most techs get it wrong more than right, techs can run at a 40%/60% win/loss ratio and still be profitable which is what it's all about. I suggest you read Nick Radges book as already suggested to get a better understanding of t/a (he explains it alot better then me).

 

[hongwong]

So basically what I am saying is trading is not taking a look at a company, you are looking at the “feeling” of the people and trading upon that.

This is where the fundamental (pardon the pun) difference lies

hmmm,

Is this how Technical people trade stocks, by looking at the "feeling" of people trading the stocks and then determine if you should buy or sell the shares.

Again I am not here to determine if method a is better method b. I am looking at how technical people trade shares.

I agree all shares are different and therefore to get a gut feel of the shares I believe you should ask questions about the shares.
Like go to the shopping centre and see if there are customer at the store etc is one method.

Therefore to check that the market is over reacting to a down mood, I would look at my fundamental "homework" and determine I have done the right thing?

As started in this thread the psychology seems to be a big part of trading.. Hence how do you technical people over come this, you are depending on the mood of the share market?

Thanks

 

[rub92me]

hmmm,

1) Is this how Technical people trade stocks, by looking at the "feeling" of people trading the stocks and then determine if you should buy or sell the shares.

2) Therefore to check that the market is over reacting to a down mood, I would look at my fundamental "homework" and determine I have done the right thing?

3) As started in this thread the psychology seems to be a big part of trading.. Hence how do you technical people over come this, you are depending on the mood of the share market?

Thanks

1) Some schools of thought are that the behaviour of people is reflected in share price movements (e.g. waves/patterns), which can be used to determine entries/exits.
2) A technical trader would test wether their 'edge' does indeed result in a positive expectancy and hence a profitable outcome; otherwise it's back to the drawing board.
3) By being disciplined and sticking to the tested plan, therefore taking the psychology out of the equation.

 

[Glenhaven]

I think that the way to sum up the problem of traders is that:

The biggest problem with achieving a big profit is a small profit; and

The smallest problem with achieving a big loss ia a small loss.

What this means is traders usually sell winners too soon (take a small profit), and hold on to losing positions waiting to get square and end up with a big loss.

This is one of the reasons why stop loss sales are a good protection against our own tendency to hang on to losers.

 

[hongwong]

1) Some schools of thought are that the behaviour of people is reflected in share price movements (e.g. waves/patterns), which can be used to determine entries/exits.
2) A technical trader would test wether their 'edge' does indeed result in a positive expectancy and hence a profitable outcome; otherwise it's back to the drawing board.
3) By being disciplined and sticking to the tested plan, therefore taking the psychology out of the equation.

If all shares and graphs are different, then how can you match one graph to other?

This is like saying head is going to come out on the next coin toss because the last one was tails?

thanks

 

[rub92me]

Just read some of the books recommended in this thread. That should clear it up..

 

[Slothhead]

I will second that, you need to do some reading.

There are reasons that we see support and resistance lines.
Just as there are reasons why people buy on P/E ratio

Yeah, do some reading

 

[hongwong]

I will second that, you need to do some reading.

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....

 

[professor_frink]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read ....

Just wish someone could tell me why they would sell out, buy from the charts ....

forward we go ....

hongwong,

There are currently over 5 000 threads on ASF, many of which have charts and descriptions of what various people are seeing when they look at them. Instead of asking for it to be spoon fed to you via a written explanation on this thread, you could always start searching the forum for some examples of TA and go from there.

 

[wayneL]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....

There are as many different reasons as there are techniques and traders. This is an individual thing. One persons buy signal may be another persons sell. All that matters is that expectancy is positive:

Expectancy=((1 + reward/risk ratio) * win/loss ratio)-1

This is similar to F/A. There can be concurrent broker recommendations of "Buy" and "Sell" on the same stock. Who's right?

Doesn't matter so long as there is profit on the bottom line

 

[theasxgorilla]

All that matters is that expectancy is positive:

Expectancy=((1 + reward/risk ratio) * win/loss ratio)-1

...and at risk of being anal, that the method provides sufficient opportunity to sustain the profit your tested/traded positive expectancy suggests you ought to make, per dollar risked or however you quantify it.

 

[rowes]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....

You would buy because the chart has given you your buy signal (Using whatever methods you are using in YOUR trading plan) then you would sell once the reason/s you had for taking the position are no longer there, again using whatever methods you are using in YOUR trading plan.
Thats why i would buy and sell from a chart using MY trading plan.

 

[Wysiwyg]

My failures have the same reasons every time.

1) In too soon
2) In too late
3) Out too soon
4) Out too late

 

[dlineinvestor]

"lack of patience"
"lack of correct timing to your entry"

If one simply waited for ....
Overbought or Oversold market conditions "then bought

You could throw a dart at just about any asx20 and make money.

Sounds too easy right, this won't suit everyone but overtime it's been a much better method for me.